This article originally appeared on The Tyee.

Although a government-commissioned scientific review of fracking in British Columbia released earlier this month occupies some 232 pages, the word “concerns,” as in “concerns regarding environmental impact,” pops up more than 130 times.

That’s a lot of scientific apprehension about a technology that serves as the foundation for the province’s growing liquefied natural gas industry.

More than 90 per cent of all oil and gas wells in B.C. require extensive fracking, which pulverizes hydrocarbon-bearing rock with highly pressurized streams of water, sand and chemicals.

In its final report, the three-member scientific panel tasked with the review expressed “concerns” about every part of its limited investigation, particularly around water, seismic hazards and gas migration.

(It’s worth noting the review did not look at public health issues, cumulative land impacts, social costs, or the industry’s poor economic health or worker safety.)

The paucity of the data the researchers drew upon, perhaps, explains the proliferation of so many “concerns” in the review.

The word insufficient, as in “insufficient information,” peppers the report 27 times, while “unknown” appears 17 times.

Uncertain or uncertainty, as in “uncertain water quality,” appears nearly 50 times, while gaps, as in “important knowledge gaps,” litters the document 27 times.

Here’s a brief snapshot of eight “insufficient” and “unknown” data gaps the government of B.C., a proponent of LNG terminals, still faces regarding the impacts of the fracking industry on water, earthquakes and gas migration.

1. Fracking and groundwater

The government knows little about the state of groundwater in the northeastern B.C., or how fracked wells or wastewater disposal wells may impact that critical resource over time. The province operates just seven groundwater observation wells for a vast area.

The review noted, “In [northeastern B.C.], there is a general lack of information on groundwater, particularly the extent and thickness of aquifers, because there are very few groundwater well records that can be used to map aquifers with any degree of confidence.”

2. Fracking’s risk to water, land, health

The report couldn’t draw conclusions about risks the industry poses to water, land and health because of insufficient data. “The very rapid development of shale gas in [northeastern B.C.] has made it difficult to assure that risks are being adequately managed at every step. Furthermore, the panel could not quantify risk because there are too few data to assess risk.”

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3. Success of regulation

The report couldn’t tell if the industry-funded B.C. Oil and Gas Commission was a competent regulator because, after a decade of overseeing a fracking boom in northeastern B.C., “insufficient evidence was provided to the panel to assess the degree of compliance and enforcement of regulations.”

4. Radioactive waste

The government knows little about radioactive hazards associated with fracking. Shale deposits containing oil or gas are deep and often contain salty waters contaminated with uranium, thorium and radium. The industry calls these radioactive elements “Normally Occurring Radioactive Material (NORM).” Fracking has changed the concentration and volume of NORM being produced at wellsites across North America.

“The issue of NORM throughout wastewater cycle (storage facilities, pipes, solid waste) needs careful examination by government to determine if current practices are sufficient for protecting human health and the environment,” reads the report.

5. Water consumption

The fracking industry consumes rivers and lakes of water, yet data on water quantity is insufficient or unknown. Even the panel noted that the data it cited in the report on water consumption by the industry was “outdated.”

“Considering the vastness of the region, alongside the increased level of industrial development, the panel considers the baseline data and the ongoing monitoring of surface water and groundwater quantity to be insufficient.

“Baseline data and information on streamflow, lake levels, and wetlands are sorely lacking, particularly given the high demand for surface water for industrial use.”

A B.C. Oil and Gas Commission technical expert told the panel, “There are a lot of data shortages, especially in smaller basins, and industry is interested in these smaller basins.”

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6. Contaminated waste water disposal

There are serious questions about the region’s geological capacity to accommodate more disposal wells should LNG ramp up. Every year the fracking industry generates millions of barrels of toxic salty wastewater from shale formations. The law requires that industry re-inject these so-called “produced waters” back into the ground into designated disposal wells.

Pumping waste into 100 designated disposal wells over time has caused earthquakes and forced the closure of seven disposal wells. Disposal wells remain a constant threat to groundwater too.

The scientific panel learned that “if LNG ramps up again, [there would be] more pressure on these disposal wells. From a technical perspective, there are limits on pressure and flow due to potential seismic influences, and there are also potential impacts to neighbouring oil and gas wells and other disposal wells.”

The report added that “significant concern was expressed by government staff, the regulator and industry about insufficient capacity for wastewater disposal in [northeastern B.C.], because “there is no solid understanding of the volume needed and disposal requirements in the Montney for growth scenarios.”

7. Earthquakes

The report raised multiple concerns about the thousands of earthquakes caused by hydraulic fracturing and wastewater disposal wells in northeastern B.C. It noted that cumulative injection volumes had played a role in generating earthquakes in areas with “dense hydraulic fracturing operations.”

The panel found that “the maximum magnitude of an event that could be induced in [northeastern B.C.] is unknown” and that “evaluating the success of a mitigation technique is difficult, given the industry’s current inability to forecast what would have happened without mitigation.” Given all the unknowns, the panel recommended more and better seismic monitoring in the region.

8. Methane leaks

The B.C. government doesn’t have good data on the number of methane leaks from oil and gas wells, or the volume of fugitive methane being released by the industry. Methane, a greenhouse gas, is a much more potent destabilizer of the climate than carbon dioxide.

The panel recommended that industry data on surface casing leaks within the wellbore “be made publicly available, including both detected/measured leaks and monitoring and mitigation measures taken. In several cases, it was communicated to the panel that known leaks were being allowed to persist and that they would be dealt with at the time of well abandonment.”

On leaks outside the wellbore, known as “gas migration,” the panel reported that it “was acknowledged by both industry and non-industry presenters that there is a need for a better sense of occurrences and incident rates.”

In conclusion, the panel noted “an overall lack of transparency of data and information.”

As cement in wellbores ages, it cracks creating pathways for methane and other gases such as radium to find a way to the surface. The report noted, “experiences with the long-term integrity of wellbores is limited and represents a major knowledge gap.”

The report, which has stated nothing new about the industry and offers no concrete data on water consumption or waste water volume, failed to address a number of other critical issues, such as diminishing returns.

Fracking deep shale rock requires more capital, water and energy to retrieve fewer hydrocarbons than conventional drilling.

In most shale basins, companies only recover 12 to 18 per cent of the resource, even though they are using massive volumes of sand and water to attack the rock.

In contrast, the drilling of conventional resources often recover as much as 30 to 40 per cent of the resource.

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Kinder Morgan’s decision to suspend work on its controversial $7.4-billion Trans Mountain pipeline looks like a another corporate attempt to blackmail Canadian governments.

On Sunday the Texas-based company, which emerged from the ashes of scandal-ridden Enron, abruptly announced it was suspending all “non-essential” work on the export pipeline.

Steve Kean, CEO of Kinder Morgan Canada, blamed the B.C. government for the suspension — even though the National Energy Board has not approved construction for any portion of the project but the Westridge marine terminal in Burnaby.

Even Kinder Morgan has repeatedly acknowledged the reality of setbacks in presentations to investors, citing “a potential unmitigated project delay to December 2020” as recently as last month.

Still, Kean blamed B.C. “What we have is a government that is openly in opposition and has reaffirmed that opposition very recently,” he said.

But aren’t democracies supposed to challenge projects that impose unprecedented economic and environment risks on their citizens?

Wouldn’t a tanker spill of diluted bitumen in the Salish Sea, where one-third of western Canada’s population lives, be an economic and environmental catastrophe, devastating tourism, property values and marine life?

Wouldn’t the doubling of tolls on the expanded pipeline, as approved by the National Energy Board, raise gas prices for British Columbian motorists by $100 million a year? The pipeline now supplies southern B.C. with most of its petroleum.

Won’t Alberta, by exporting diluted bitumen to Asian refineries, repeat the original Canadian sin of failing to add value to resources at home, giving up thousands of jobs and billions in revenue?

How can exporting one of the world’s most carbon intensive fuels help fight climate change?

And can’t corporations with viable projects accommodate citizens, courts, First Nations and economists who think such costs and liabilities should be properly accounted for?

But Kinder Morgan prefers bluster and blackmail instead of the reality that the project was never a sound venture because it was about privatizing gains and socializing costs.

Economist Robyn Allan has repeatedly argued that Kinder Morgan is no ordinary company and the Trans Mountain expansion project has been uneconomic since day one.

She told The Tyee that “Kinder Morgan is looking for an exit strategy, but it likely includes a need to demonize Ottawa in order to set the stage for a suit under NAFTA.”

The drama begins with the biased workings of the National Energy Board, which refused to look at downstream and upstream climate impacts of the project and even failed to scrutinize its commercial viability during public hearings.

The best evidence from experts shows that Kinder Morgan, the Canadian government and Notley have misrepresented the pipeline’s illusory benefits.

A pipeline to the coast will not raise bitumen prices, because all global markets discount junk crude due to its poor quality.

The ill-conceived project will export refining jobs and great clouds of climate-changing emissions to China. In addition tanker traffic place southern resident orcas at risk.

The Houston-based firm that Prime Minister Justin Trudeau and Alberta Premier Rachel Notley now salute as a defender of Canada’s national interest is the spawn of Enron, found guilty of accounting fraud and corruption. The energy trader’s collapse cost shareholders $74 billion and killed 20,000 jobs.

Kinder Morgan, a dirty and unsexy mover of gas and oil, began as Enron Liquids Pipeline in 1997. Enron alumni continue to populate the senior ranks of Kinder Morgan.

They include Richard Kinder, a Texas billionaire and Kinder Morgan’s chair. He worked at Enron for 16 years. Jordan Mintz, the chief tax officer, served as the vice-president of Enron’s tax division from 1996-2000.

Kean, the man now baiting Canadian governments, worked as Enron’s senior vice-president of government affairs. And so on.

These Enron alumni probably think Canadian politicians are the ultimate pushovers and dimwits.

During the 2014 NEB Trans Mountain hearings the U.S. parent firm vowed to provide 100 per cent of the debt and equity for the pipeline.

But after a Wall Street analyst suggested the third largest energy company in North America wasn’t spending enough to maintain its pipelines or returning value to investors, the company’s share price fell. Kinder Morgan’s stock value plummeted in 2015 and continues to languish. Lower oil prices and rising debt put its largest capital project on shaky ground.

Allan says investors recognized a year ago that the Trans Mountain project didn’t make commercial sense. As investor interest waned, Allan said, Kinder Morgan couldn’t raise debt or equity in the U.S. markets or find a joint-venture partner.

The job of raising money for the project then fell to Kinder Morgan Canada. But $1.6 billion it raised in 2017 went to pay off debts of its parent company.

Richard Kinder explained the move in a conference call with investors: “So we were able to strengthen KMI’S balance sheet using the IPO proceeds to pay down debt… ”

Kinder Morgan Canada has arranged $5.5 billion in construction facility loans from Canadian banks — but only if Kinder Morgan raises $2 billion in equity for the project.

“And now we learn from Premier Notley and Kinder Morgan Canada CEO Steven Kean that conversations with Alberta for financial support have taken place,” says Allan.

Rachel Notley, Canada’s leading petro politician, apparently can’t wait to pour taxpayers’ money into a project that the market views as high risk and that British Columbians regard as a threat to their best interests.

“Alberta is prepared to do whatever it takes to get this pipeline built — including taking a public position in the pipeline,” Notley said Sunday.

So corporate blackmail works like a charm in Canada.

Allan says Kinder Morgan is looking for a way out.

“The project is not commercially viable and, even before it’s built, Kinder Morgan is looking for a bailout,” she said. “If Kinder Morgan’s long-term contracts for moving 700,000 barrels of bitumen and oil on a controversial pipeline were solid, would Kinder Morgan now be blaming the government of B.C. for its problems?”

In a normal world governments concerned about fiscal prudence and the public interest would let Kinder Morgan abandon a non-viable project. (Some analysts have already said cancelling the project would be a “significant blow,” but not “the end of the world for Kinder Morgan.”)

In a moral world Canadian governments would admit that pipelines and tankers export refinery jobs and greenhouse gas emissions on a disastrous scale.

In a just world Alberta would have to admit it has allowed industry to overproduce bitumen due to low royalties and bad governance. The province has no strategic plan for bitumen other than screaming for pipelines.

But Canada, like its southern neighbour, is having trouble behaving normally, morally or justly these days.

But Trudeau and Notley think it’s OK to embrace a debt-ridden U.S. company so it can export, via tankers, unrefined bitumen to Chinese refineries where the upgraded resource can enrich the authoritarian Communist party.

Canadians should be more than ashamed.

They should be alarmed.

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The recommendation of an Alberta review panel not to raise royalty rates paid by oil and gas companies to the province is an economic disaster and represents a capitulation to Big Oil and its financial backers, say a variety of critics.

Released last Friday, a five-month review into the royalty system argued that low global oil prices had placed Alberta in an existential quandary and that no increases should be considered in royalty rates.

Royalty rates are not costs or taxes, but a price a company must pay to the owner for the right to develop the resource.

For 35 years, the former Tory government of Alberta consistently lowered royalty rates to among the lowest in the world. At the same time it saved almost nothing for future generations.

But the long-delayed review, commissioned by the new NDP government in 2015 as the result of an election promise, concluded that the “current share of value Albertans receive from our resources is generally appropriate.”

The review added that Albertans should stop focusing “on questions of ‘are the rates right,'” and look more “on what changes need to be made to our royalty framework to position Alberta and our energy industry to address the challenges of a very different environment and outlook for the future.”

The review then recommended maintaining current royalty rates for wells drilled before 2017 and setting a generic rate — five per cent — for all new oil and gas wells drilled after 2017, a policy equivalent to grading and selling all cuts of beef as hamburger.

Such a policy, if adopted, would lower Alberta’s royalties by another billion dollars a year, estimated Jim Roy, an Edmonton-based royalty consultant and a former senior advisor on royalty policy for Alberta Energy.

The new generic rate will reduce the current 30 per cent royalty rates for high-valued products such as propane and butane to five per cent.

Alberta’s total royalty revenues from hydrocarbons in fiscal year 2015/16 were approximately $2.8 billion — a mammoth decrease from modest highs of $10 billion or more during the boom years.

Investor, not owner friendly: expert

Roy said the government’s review is completely off base and doesn’t address the real issues.

“We have low prices now. Why encourage more production and more investment which will only bring oil prices lower?” asked Roy.

Given that the global oil glut has largely been caused by overproduction by Canadian bitumen miners and U.S. oil shale frackers, Alberta should increase royalties to decrease production and thereby eliminate inefficient and high-cost energy extractors, Roy said.

Since 1998, oil sands production has soared from nearly 800,000 barrels a day to more than 2.3 million barrels a day, largely due to cheap credit, low royalties and other government incentives and subsidies.

Hydraulic fracturing and horizontal drilling in the province has also been driven by a three-year royalty moratorium imposed in 2009. That royalty holiday guarantees companies high returns up front and little for the owner of the resource until the well is exhausted.

Fracked wells typically experience 60 to 80 per cent depletion rates after three years of operation.

The review takes the perspective of an investor, not the perspective of an owner, charged Roy. “In order to optimize returns to Albertans, the government needs to think like an owner,” added the royalty expert.

Two of the review panel’s key members — Dave Mowat, president of the Alberta Treasury Branch and Peter Tertzakian, managing director of Arc Financial Corp — both work for firms that invest billions in the oil patch.

The panel’s analysis, according to Roy, “ignores the effect of increased production of Alberta bitumen on either the local price of bitumen or the world price of oil. The plan appears to be to increase Alberta production at the maximum possible rate despite low prices… This strategy may help American consumers, but does not help Alberta owners.”

Roy’s analysis, reported in The Tyee last year, found that the province’s last royalty review in 2007 actually shorted the province more than $12 billion in royalties during a time of high oil prices.

Former premier Ed Stelmach promised Albertans that the new formulas for calculating royalties would increase Alberta’s “fair share” of hydrocarbon profits by $2 billion a year, beginning in 2009.

But that didn’t happen. Instead of increasing royalties by $2 billion a year, Alberta’s “fair share” plummeted due to bad forecasting and major flaws in how the province collects natural gas and bitumen royalties, Roy said.

As a result the province, which has recorded annual deficits of billions, has failed to collect $12 billion in royalties over the last five years, he said. The new review failed to correct those problems, Roy added.

In 2010, an industry-drafted, behind-closed-doors “Competitiveness Review” further eviscerated recommended increases and made rates lower than they were before the 2007 during a period of high oil prices.

‘Shockingly bad,’ says researcher

Regan Boychuk, an independent researcher who sat on one of the review’s advisory expert panels, called the review’s conclusions “shockingly bad.”

“The review simply rearranges the chairs on the deck of the Titanic and locks in all the bad decisions and Tory giveaways of the past,” he said.

One critic interviewed by The Tyee also said that raising royalties wouldn’t affect economic activity because the worldwide average government take is already about 60 per cent.

In Alberta, the share has plummeted from a 40 per cent high during the Peter Lougheed years to less than four per cent today.

Increasing very low royalties in fiscal systems that have a low overall government take will not have any significant impact on the competitive position of such resources, said analysts.

Low royalties ‘a foot on the accelerator’

Barry Rodgers, a former high-ranking Alberta civil servant in the Department of Energy and a fiscal systems expert, noted the review barely mentions that the former Tory government consistently failed to save revenue (except under Lougheed), collect its fair share as mandated by the government policy, or report to citizens in a transparent and open manner on royalty issues.

Instead the Tories consistently lowered royalties during periods of price volatility, resulting in a downward trend for royalties over the last 35 years.

These low prices, which guaranteed companies easy returns regardless of their performance, actively contributed to over production, reduced competitiveness and encouraged little or no innovation. Low royalties also overheated the economy.

According to Rodgers, the current royalty review got off to a bad start by assuming that Alberta’s royalty system worked well and just needed some fine-tuning.

But the province’s royalty system is broken, he argued, and has been causing serious damage by subsidizing uneconomic activity. The report even notes that 27 oil sands projects, which inefficiently inject steam into the ground to melt bitumen, may never reach payout “due to excessive cost overruns.”

The new review also repeats mistakes of past royalty reviews, which repeatedly responded to earlier price collapses by lowering royalties, Rodgers said.

These low royalties, in turn, stabilized economic activity but became dismal failures when commodity prices began to rise again. Oil remains the world’s most volatile commodity.

“The lower royalties then acted like a foot on the accelerator,” explained Rodgers, “at a time when prices were already high enough to attract the levels of investment needed.”

In the process, low royalties served as a hyper growth policy that aggressively pushed into existence large, long-lived projects “that are difficult to stop and start in response to commodity price fluctuations.”

The province’s chronic low royalties also caused another problem, he said: as a declining royalty share became significant enough, it caused the public to “distrust in the resource management system.”

In other words, low royalties made it impossible for the government to earn extra revenue when prices were high and deprived the owners of the resource their fair share.

The only way for Alberta to break this disastrous royalty pattern is to slow down development, said Rodgers, as well as curtail extreme projects that need royalty relief by increasing royalties in a system that saves wealth in trust for future generations.

Alberta’s royalty policy, said Rodgers, is not consistent with the fundamental resource and environmental management notion of “In-Trust.”

That notion, long abandoned by the Tory party, reflects the principle “that current generations have a moral obligation to not leave future generations worse off.”

Missing comparisons

Although the review claimed that Alberta’s royalty rates are comparable to other jurisdictions, it failed to compare Alberta to the jurisdictions that matter most such as Saudi Arabia or Venezuela. The review, for example, makes but one mention of Norway.

Boychuk also said that the review failed to provide true comparisons that took a critical look at real government pricing around the world.

To gauge the appropriateness of bitumen royalty rates, for example, the review hired Wood Mackenzie, a firm that advises oil and gas companies.

It based its conclusions that current rates were adequate on the imaginary performance of a 35,000-barrel-a-day steam plant operation that might extract bitumen by 2022, Boychuk said.

“That’s not a comparison to real rates that are currently employed by other countries. Wood Mackenzie offered no meaningful comparison with other countries such as Venezuela or Saudi Arabia,” said Boychuk.

According to research by Rodgers, for example, Norway charges resource developers 78 per cent of the net income from oil and gas production while Alberta charges 50 per cent for conventional oil and 37 per cent for natural gas.

The report, however, avoided such comparisons other than noting that British Columbia has the lowest royalties for natural gas and that Saskatchewan managed its hydrocarbons to generate economic activity as opposed to wealth for the resource owners.

Gil McGowan, leader of the Alberta Federation of Labour and a long-time champion of royalty reform, rebuked the NDP government of Premier Rachel Notley for supporting the review.

“Some people say the NDP have come face to face with reality. I say what happened can best be described as the government being captured by industry,” McGowan told Calgary Sun columnist Rick Bell.

“I honestly think the government has made a profound political mistake,” he said. “We don’t believe progressive governments have to become conservative to deal effectively with economic issues or to succeed politically. That’s a fallacy.”

In its submission to the royalty review panel, the Fort McMurray First Nation called for modestly higher bitumen royalties and warned the Notley government not to listen to advice offered by financial institutions such as those represented by some members of the review panel.

“The financial institutions that constitute the capital markets obtain their revenues by providing services to savers and borrowers. Large projects such as in the oil sands, and the companies that invest in them, are valuable revenue sources and attractive clients to these institutions. The inclinations of these institutions will always be to want to see more attractive investment opportunities, from which they will benefit by providing them with financial services. They are not likely to provide unbiased, objective views on matters such as royalties.”

In another submission, the economist Mark Anielski reported how the province would have benefited if it had kept Lougheed’s approach to a robust and healthy royalty regime.

“Had Alberta maintained a 30 per cent royalty rate on the share of the value of the oil and gas produced between 1971 to 2014, Albertans would have generated $471.4 billion in oil and gas royalties. Had 50 per cent of these royalties been invested in the Alberta Heritage Savings and Trust Fund with annual average return of five per cent per annum we would now have an investment account worth over $481 billion.”

The current savings fund holds less than $20 billion.

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